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Unit 1 Assignment on Primark Business Environment
Diploma in Business
Unit Number and Title
Unit 1 Business Environment on Primark
The first task in this business environment on primark assignment deals with the purposes of organizations belonging to different industries. The company in question is Primark and its responsibilities towards its stakeholders have been studied along with the company’s measures to fulfill them. The next part deals with the various economic systems of different countries and how they affect the allocation of resources. UK also experiences certain regulatory and competition policies for the smooth functioning of the companies. The pricing and output decisions vary with the different market structures. Lastly, a special focus has been given on the policies that are laid down by the European Union and the impact of Brexit.
1.1 Identify what type of organisation is Primark and discuss its purpose. In addition identify and discuss the purpose of one organisation within the following categories;
- The public sector:
The company, Primark, is a subsidiary of ABF or Associated British Foods Groups which is a reputed international group of companies. The headquarters of Primark is in Ireland but the company operates in several European countries. It is a retailer which deals in merchandise and offers customers all over Europe with a diverse range of fashionable garments. One of the biggest retailers in Europe, the company has around 238 stores in the continent. It has been noticed that companies of different sectors have objectives which differ from one other. This particular organization is a private company which aims to expand its profit share (Gbadamosi, Bathgate and Nwankwo, 2013). In the private sector, all the companies strive to increase their market share which affects their profit margins. Primark has not limited itself in producing fashionable garments. It also provides other commodities to the consumers like beauty products, confectionaries, footwear, home ware, etc. The following are the main purposes of the company:
- Offering cost-effective commodities so that all kinds of customers are able to afford these.
- Producing a vast range of clothes which are updated according to the latest fashion.
- The company aims to provide the customers with an extremely swift service which is evident from its return policies.
The purposes of organizations within the following categories are as follows:
- The public sector- The government of a nation or a state looks after the organizations which come under this category. These organizations do not aim to earn huge amounts of profits but work in order to provide the public with various services and products. For example, the National Health Service (NHS) offers the common people with different services related to health and social care. One of the major functions of this organization is to let the people know about dangerous and rare diseases.
- Charity- As the name suggests, the organizations which engage themselves in charitable causes fall under this category. The main purpose is to develop the living conditions of the people. Red Cross is one such famous charitable organization which was initially founded to provide assistance to the victims of the World War ((Lindsay, 2011). However, the organization now gives help to the people who are at risk due to natural disasters or some other causes.
- Cooperative- Cooperatives are formed when a certain number of people decide to own an organization jointly. One such example is the Co-operative Bank which is located in the United Kingdom that provides financial assistance to all kinds of cooperatives as per the rules and regulations put down by the government.
1.2 Describe the extent to which Primark meets the objectives of its different stakeholders.
Stakeholders are the people who remain associated with a particular firm in the expectation of certain returns. They can be of two types, internal and external. Internal stakeholders are the ones who are involved in the business of the firm like managers, shareholders, employees, etc. and the external stakeholders are not directly linked to the functioning of the firm but are affected in some way or the other. External stakeholders are the government, suppliers and the consumers (Coombs, 2014). Like other organizations, Primark also has several responsibilities to fulfill the expectations of its employees. The company uses certain strategies to fulfill them which are as follows:
- Consumers: Fulfilling the needs of the customers must be the primary objective of any organization. Primark is not an exception as it develops different ways to meeting the needs of the consumers. The company provides the customers with products which are of high quality at extremely affordable prices. The ways of promoting the products that are undertaken by Primark are also expected to be ethical in nature (Dach and Allmendinger, 2014).
- Employees: In order to motivate the employees, the management of the company provides them with salary hikes and other incentives. Employees are also given the liberty to provide suggestions during the decision making process of the company. Rewards and remunerations are also common which are mainly given as per the performances of the employees. Education is also rendered to them on topics such as hygiene, health, AIDS and other diseases, laws for the labours, etc. to safeguard the employees against diseases and exploitation.
- Suppliers: Suppliers are the ones who go on supplying raw materials for the production of commodities. Primark has also been fair to its suppliers. The company makes sure to provide the suppliers with payments at the right time. A number of audits are also arranged at regular intervals for the suppliers and to enhance a relationship of trust with them.
- Shareholders: It is the responsibility of the management of Primark to provide information to the investors on a regular basis about the various ventures of the company (Werther Jr and Chandler, 2010). These shareholders of Primark are also given an adequate amount of the profit that is earned by the company during different enterprises.
1.3 Explain the responsibilities of Primark as an organisation and the strategies employed to meet them.
Each and every organization has responsibilities to fulfill. These duties are mainly directed towards the company’s stakeholders, government as well as the environment. Primark also has same responsibilities and undertakes different strategies to meet them. Its responsibilities are as follows:
- Consumers: It is the duty of the company to provide customers with products which are of superior quality at prices which can be afforded by most of the people in the society.
- Employees: Discrimination at workplaces is a major problem for the employees. The management is expected to look into such cases. Job security is also an important issue for the workers and Primark should be able to provide its employees with this security. Salary hikes and remunerations are also essential.
- Government: Primark is obliged to follow the rules and regulations that are laid down by the government in the workplaces (Jobs, 2015).
- Shareholders: The people who invest in the company expect to gain profits from the company’s business ventures. A contract is shared where the management is bound to give the investors their due profit as per their investment. They should also be regularly informed about the future endeavors of the company.
- Society: Developing Corporate Social Responsibility (CSR) is essential for the fulfillment of social responsibilities by Primark (Ndlela, 2015). Producing goods must not become hazardous for the society.
- Environment: Maintaining a healthy environment is one of the primary objectives of the organizations which are functioning in the recent times. Primark also tries to check on the amount of pollutants that it is releasing in the air. If biodegradable wastes are released from the production of goods then it will be less harmful for the environment.
Following are the strategies that are undertaken by Primark to fulfill its responsibilities:
- Primark does not provide its customers with plastic bags to safeguard the environment. It has rather opted for paper bags which are eco-friendly in nature.
- The company timely pays all the taxes of the government and follows the legislative rules of the government.
- Suppliers are provided with good transportation and communication facilities to make work easier for them.
- Maintaining the health of the employees is also a priority for Primark because of which they give health insurances to the employees.
- In Bangladesh, Primark started the HER project which taught the wome employees about different health conditions related to diseases, childbirth, etc. the project provided employment to several women who found their financial independence.
- Even in India, Primark has joined a project related to cotton farming (Doshi, 2016). This has been beneficial in providing employment to Indian women in the cotton fields.
2.1 Different countries operate different economic systems to attempt to allocate resources effectively. Research and explain the type of system operated in the following countries and reasons why you think they follow these systems.
- United Kingdom:
A number of economic systems are present all over the world. In UK, the resource allocation varies with these systems which are mentioned below:
- Command Economy: The government of any country or state is the chief decision maker in the command economy. Even when certain changes are necessary, the power of making the decision rests with the government. This body of authority allocates resources within definite limits and no company is given the freedom to get involved in the decision making process. Here, equitable distribution of resources takes place. The lack of profit proves prevents the economy from any kind of improvement.
- Free Enterprise: Entry and exit of organizations are easy in this economy. The management of each of the organizations has the right to make decisions without the interference of the government (Scott and Davis, 2015). Equitable distribution of resources is not possible. Any kind of decision regarding resource allocation is taken jointly by the consumers and the organizations.
- Mixed economy: In a mixed economy, the organizations earn revenue and both the organizations and the government allocate resources. Government attains such resources through the collection of different taxes. The companies hold certain responsibilities towards the welfare of the society.
- Transitional Economy: This economy comes midway between the command and free economy. The various market forces have the liberty to set price standards and trading is made easier. This is a movement from the public sector towards the private sector and the allocation resources also vary likewise.
- Cuba: Cuba experiences a command economy. All the rights of allocating resources rest with the government who takes the necessary decisions. The companies do not have the power to interfere or make any decision.
- United Kingdom: In United Kingdom, mixed economy is experienced. The decisions that are related to trading are taken by the private companies but the Government has the liberty to interfere in the decision making process of the companies (Dunning, 2014). Organizations under education, health care, etc. are controlled by the government. The private companies cannot make any changes in these particular sectors.
- China: The economy of China was initially under the control of the Government of the country. However, private companies have also entered the market which is helping in the country’s economical development. The country is moving towards free enterprise.
2.2 In the UK the Chancellor of the Exchequer and the Bank of England plays a significant role in regulating the economy. The tools used by them are referred to as Fiscal and Monetary policies respectively.
You are required to assess the impact of fiscal and monetary policy on the following type of businesses
Fiscal Policy: It is the policy of the government where the government itself or the enterprises that are owned by it take the necessary decisions. These decisions are mainly taken with respect to the collection of revenue as well as its utilization. The government finds out creative ways to use the extra revenue when a surplus amount is available.
Monetary Policy: It deals with the power of the government regarding the handling of finances and money. A diverse range of factors form a part of this policy which ranges from interest rates, supply of money and credit and so on (Hansen, 2013).
Following are the impacts of these two policies on farming and housing:
- Farming: When the Government of the country, here United Kingdom, earns a large amount of revenue then it can utilize the extra money for developing the agricultural sector of the United Kingdom. Advanced equipments can be bought by using this money which will increase the agricultural production of the farmers. Commodities which are associated with this sector may also experience price fluctuations doe to changes in the monetary and fiscal policies. Increase in the price rates of agricultural goods is experienced in case of inflation. This enables the organizations to generate higher revenues because of agricultural practices. On the other hand, if unfavourable changes take place in the fiscal and monetary policies then the expenditure of the farmers is likely to increase (Coats and Khatkhate, 2014).
- Housing: The tax rates undergo changes with alterations in the monetary and fiscal policies. Other than tax rates, price of commodities, income and employment opportunities also change. This is because when the cash flow in an economy, like that of UK, increases then the tax rates of the country also gets reduced. The same thing happens in the housing sector. When the tax rates reduce, investments in the housing sector increase by the common people because their expenditure reduces to a certain extent. However, when the government decides to restrict the cash flow, then the housing sector will experience a reduction in its demand.
2.3 Competition is an essential element in the efficient working of markets. However businesses are of different sizes and that can create unfair competition. In the UK as in other European nations Competition policies are used to encourage and improve the competitive process, and to ensure consumers feel the benefits of that process.
You are required to identify at least five competition policy and other regulatory mechanisms in the UK and evaluate their impact on the activities of a selected organization(s).
Competition policies help the organizations with several opportunities for the purpose of stabilizing their economic condition. In order to increase job opportunities and to safeguard customers from exploitation, competition policies are important. Monopoly markets cease to exist because of such policies. GSK or GlaxoSmithKline is one such company in the UK which earns high level of revenue through the business of medicinal products. It has a number of competitors. The main competition policies are as follows:
- Merger Control: In the UK, CMA or the Competition and Markets Authority monitors the business powers of companies which merge with other companies. The permission of merging companies is only given when it does not act as a hindrance for smaller companies (Labov, 2011). Such practices can be restricted when they notice that the competition in the market has reduced considerably.
- Market Liberalization: When new firms enter a market which was initially monopolistic, it is known as market liberalization. GSK used to be the primary company in the pharmaceutical industry before the intervention of other countries. Companies like AZ have increased the competition.
- Consumer protection: The Government of UK and other countries try to safeguard customers from exploitation. Exploitation takes place when the prices of products are very high and the customers are given a limited number of options.
- State Measures: A country’s government can intervene in the practices that take place in the market. Such interventions take place when the economy is bereft of suitable competition.
- Antitrust and Cartels: Government can terminate such contracts and agreements that cause hindrance in the practice of competition in an economy.The prevalence of regulatory policies also prevents the restriction of power in the hands of a particular organization. Regulatory policies are initiated by the Government so that no single company is able to practice all types of business activities (Tricker, 2015). Like the competition polices, regulatory policies also save customers from possible exploitation. The products are affordable and of high quality which can be bought by customers from all sections of the society. Both the business environment as well as the customers are safeguarded.
3.1 Explain how pricing and output decisions of businesses is determined in the following market structures
- perfect competition
The market structures like perfect competition, oligopoly, monopoly and duopoly are determined by the prices and output decisions of different organizations. The number of manufacturers and purchasers are distinct for each of these markets. Even in United Kingdom, different companies fall within each of these market structures.
- Perfect Competition- One of the main features of this market structure is the selling of products which are homogeneous in nature. Companies are free to enter and exit the market as per their wishes and this market has a large of producers and buyers. Prices of commodities cannot be decided by a single firm because a huge number of competitors are present. Consumers choose good quality products from a wide range of companies at affordable prices. As for example, the farmers who are present in the farming sell identical fruits and vegetables. A comparison of prices takes place before a customer decides to purchase a particular product. Restaurant chains in the country operate in perfect competitive market.
- Monopoly- This is the most problematic market structure because only one seller is present who has the freedom to sell a product or a service ((Kumar and Siddharthan, 2013). The product or the service is unique in its nature and this market structure is known as monopoly. Organizations which are willing to sell the same kind of product are restricted from entering the market. The single firm which is present in the market has power to decide the prices. Due to the absence of competitors, consumers are exploited in this structure as the sole producer has the power to decide the price as well as to limit production. For example, the Network rail is responsible for the maintenance of railways in UK.
- Oligopoly- In oligopoly a number of organizations are present but these less in number. The sizes of the firms are large. It is a midway between perfect competition and monopoly because entry and exit of organizations is easier as compared to monopoly and more difficult when compared to perfect competition. These large companies decide prices. One of the most prominent examples is Unilever which functions in oligopoly market structure which has a competitor named Procter and Gamble (Akwetey, 2015). These companies sell detergent. A similar example is that of Tesco along with Sainsbury’s. These two companies engage themselves in selling groceries.
- Duopoly- Duopoly is the market structure where two organizations are present for selling a product. Both of these are powerful and are competitors. For examples, the American airlines company Boeing and British based Airbus are competitors as well as extremely dominant in the airline industry.
3.2 Illustrate the way in which market forces (demand and supply) shape organisational responses using a range of examples (diagrams are essential).
Demand- The amount of any commodity that the customers are willing to buy is known as demand. It depends on price. A curve can be drawn to explain the relation between price and the quantity demanded which is known as the demand curve.
Fig 1: The Demand of a product varying with quantity (Schmitz, 2012)
Supply- Supply is the amount of any product that the organizations are eager to produce for the customers at a certain amount of price. A supply curve can also be drawn to explain this relationship.
Fig 2: The Supply Curve (Schmitz, 2012)
For the proper functioning of a company, it needs to balance between these two market forces. Demand and supply work together and are dependent on certain factors. Often companies find it advantageous to limit the supply of their product during situations of high demand which would lead to an increase of the price level. For example, GSK was held responsible for the limitation of Ebola vaccines when the virus of the same name started to spread in the country (Hayden, 2016). But organizations like NHS and Red Cross took help of this situation to generate revenue by decreasing the price of the vaccines and drawing more customers. It can be concluded that both demand and supply are affected by the prices of products and vice versa.
Even companies like Tesco change the prices of their products at regular intervals because of the presence of a number of competing organizations. The company’s products which are of daily usage are affordable in nature. The management provides consumers with club cards so that they are able to get discounts and gather points. It also decides to lessen certain prices for increasing the demand of those products. For example, the decision of Tesco to raise the price of the bed rolls was a result of the increase in the prices or rice and wheat globally. With an increase in the cost of production, the selling price also increased which led to a decrease in the demand. Therefore, price and demand are interdependent on each other.
Due to an increase in the demand of healthy food habits,McDonald’s is facing a demand for antibiotic free food products (Frost, 2015). The company is making products which do not contain ingredients that are genetically engineered. Healthy eating habits are also proving to be harmful for soft drinks companies like Coca Cola. Therefore, it is evident that both the demand and supply of products depend on the price and vice versa.
3.3 Judge how the business and cultural environments shape the behaviour of a selected organisation.
The behaviour of any organization is determined by both business and cultural environments. The changes that occur in the profits and sales rates constitute the cultural factors. Brand reputation is also an important factor that affects the behaviour of a firm. In GSK, a large number of the employees belong to different parts of the world. Therefore, the workplace environment of GSK comprises of the different races and religions of the world. The culture of the workplace is determined by a mix of the traditions and values. The presence of both men and women in the workplace is also an important factor. Often, cultural differences prove to be harmful for the profit making motives of the company as the employees may not agree to work in harmony with each other (Cummings and Worley, 2014). So, when a company like GSK takes the decision of opening a firm in a country, it will have to keep in mind the cultural practices of that particular place for the smooth functioning of the company.
The types of business environment are as follows:
- Economic environment: It consists of the different kinds of economic systems and the policies.
- Non-economic environment: Factors like social, technological and political together form the non-economic environment of a particular organization.
As mentioned earlier, the environment of the workplace of GSK is determined by the cultural practices which are present in the countries where the company has decided to set up its branch. For example, GSK faced a lot of trouble in China because the company’s managerial authorities were accused to bribe the Chinese doctors in return of the promotion of GSKs medicines by these doctors (Kessel, 2014). This particular incident led to the closing of the company’s Shanghai office and was also heavily penalized. A conclusion can be drawn that cultural and business environments are responsible for shaping the behaviour of any organization just like the case of GSK.
4.1 Discuss the significance of international trade to UK business organizations.
Companies all over the world are provided with a platform for doing business which is known as international trade practices. Companies are able to earn revenue in foreign currency which increases the profit margins of the company. Brand awareness is also an important result of the international trade as more and more people become aware of this. The importances of international trade to UK organizations are as follows:
The international market: AstraZeneca (AZ) and GSK are pharmaceutical companies which have the permission of taking part in the international trade. Such companies plan their products as per the taste and preference patterns of people in foreign countries (Helpmanand Razin, 2014). For examples, GSK has decided to sell their medicines at low prices in developing and underdeveloped nations so that people in those countries are able to purchase these. Even Tesco has a great number of branches in foreign countries which enable it to earn profit and become one of the largest retail companies present internationally.
Availability of cheap labour: These UK companies provide employment to a lot of people from the Asian and other economically backward countries. It is because cost-effective labour is available in these countries resulting in the reduction of the cost of production. Nestle made headlines when the company was accused of using child labour in the cocoa fields of Ghana and Ivory Coast. This shows the drawbacks of international trade as well.
Availability of raw materials at extremely low prices: Certain raw materials can be found at low prices in the foreign countries. The companies make use of these cost-effective raw materials to decrease their cost per unit of production. When raw materials are available locally, production processes become easier. It has certain disadvantages also. The chocolate company, Nestle, uses Ivory Coast’s extensive cocoa fields for the production of chocolates at low cost of production. The production cost is definitely reduced but the excessive use of raw materials can be harmful for the country.
Creating brand awareness among people: People all over the world gain knowledge of certain international brands due to the functioning of the international trade (Feenstra, 2015). The people who live in the Asian countries are aware about the medicinal products that are manufactured in companies like AZ and GSK. Even McDonald’s decision of making chicken burger instead of beef burger has earned the company a lot of reputation because the menu is made according to the cultural practices of the country.
4.2 Analyse the impact of global factors on UK business organizations.
The organizations which are present in UK as well as in other countries are affected by political, economical, legal, ecological and social factors. These factors have both advantages and disadvantages. Due to an increase in the rate of competition, the companies are always at a threat
When the European countries experienced the outbreak of Ebola viruses, GSK started to accumulate huge amounts of revenue by selling the Ebola vaccines (Ficenec, 2015). The profit amount exceeded the target that had been expected. The company also gained from the selling of HIV drugs in the year 2015 at an international level. In spite of all the successes, it cannot be ignored that the extreme production of medicines has its impact on the environment. AstraZeneca developed a tracking system known as the ‘ecopharmavigilance’ which helped in the recording of new data as soon as it entered the environment because of the production process of the organization. People have started to respect the company due to their measure of checking pollution. But the scandal of bribery which took place in China was a great blow to the reputation of the UK based GlaxoSmithKline through the closing of the company’s office at Shanghai. Even the US license of AZ was cancelled in 2014 (Owens, 2015).
When Europe was facing the shortage of eggs post the occurrence of bird flu in the continent, McDonald’s came up with its offers on breakfast meals. This scheme was available throughout the day and the meals also consisted of eggs. It was suspected that such a business strategy of McDonald’s could increase the shortage of eggs in the market. Russia’s request in the 1990s to McDonald’s was to change the overall look of the stores that were present in the country in accordance with the country’s culture. Even China was not far behind in making a similar request when the country asked to makes the designs of the outlets much more oriental in nature.
The main reason that allowed the company, McDonald’s, to become successful was the advancement it made in the technological sphere. The company has been producing food in huge amounts in countries all across the world. It takes care of the cultural preferences of the country like the introduction of chicken burgers in India instead of beef (Kannan, 2014). This detailed study of the culture of a country helps organizations to succeed globally.
4.3 Evaluate the impact of policies of the European Union on UK business organisations
The European Union (EU) lays down various rules which the member countries need to follow. These policies affect the functioning of the organizations in different ways. Pharmaceutical companies are also affected by the policies of the EU. Two UK based companies which have been extremely affected are GlaxoSmithKline (GSK) and AstraZeneca (AZ).
The legal barriers which were present during the functioning of a company in a foreign country are removed due to the policies that have been framed by the EU. The numbers of customers who are associated with each of the companies also increase because of the operation of the organizations in more than one country. Taxation policies are very important when an organization decides to get involved in trading practices (Wallace, Pollack and Young, 2015). Other policies that affect the business of a firm are cultural and regional policies. Registration of companies is important before starting trade practices. When the UK Government decided to cut down the prices of products in the pharmaceutical industry, GSK started to earn lesser amounts of profit.
It is also the responsibility of the European Union to ensure the food safety standards of the products that are being sold by the companies all over the world. The safety standards are put down by the Union which the companies are expected to follow. EU allows the selling of those products which are safe to produce and also safe to use. AZ introduced Zurampic for people with the problem of gout. EU allowed the selling of the product after an extensive search was done which ensured the safety standard of this particular product.
The Italian franchisees of McDonald’s complained to the EU that the company treats its franchisees unfairly. The company’s worldwide reputation is used the organization to charge extreme money from the franchisees. It charged the franchisees an amount of money which was almost ten times to the money that was charged by other companies. They were also not given the liberty to move to any other brand of their choice. The complaint was given to the European Union for proper measures. This association does not allow the operation of a particular company by hampering the businesses of smaller companies.
However, the people voted against the functioning of the European Union which is known as the Brexit (Dhingra, Ottaviano, Sampson and Van Reenen, 2016). Ever since the exit of the Union, UK has been facing a lot of instability in terms of its economic conditions. The foreign earnings have also suffered considerably.
It can be concluded that the European Union tried to operate for the smooth functioning of the organizations. But the voting out of the association, Brexit, has led to a considerable decrease in the economic turnover of the companies. The financial condition has become extremely unstable. The fluctuations of demand and supply with relation to the price of the commodities are studied at length. The functioning of organizations like GSK, AZ, McDonald’s and Tesco help to understand the factors that help the companies to enhance their profit margins.
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